4 Common Startup Problems (and Their Solutions)

Elon Musk, creator and developer of massive companies like Tesla, and SpaceX, once said that “Running a startup is like chewing glass and staring into the abyss.”

Harsh words for any budding entrepreneur. While it may be easy to disagree with Musk, his clout and reputation are far harder to discredit. The truth is, running a startup isn’t the bright, electrifying ride those who survived it claim it to be. Survivorship bias tends to have a strong effect on people.

In reality, as time increases, the more likely a new business is to collapse rather than thrive.

So how do we prevent this reality? What problems are fatal to a startup, and better yet—how can we turn the tide before it’s too late?

Here are four common startup problems and ways you can avoid them.

Neglecting Your Foundation

If you base yourself in Silicon Valley, Austin, or any of the other massive startup cities across America, there’s an easy pathway towards scope creep.

Anyone who’s worked in freelance may be familiar with the term. Without proper documentation of deliverables and actionable items, clients can sometimes request a little more than what was agreed upon. Then a little more after that, then more…when suddenly you find yourself completing double the tasks at half the rate.

Any time you add a new product or launch a new service, ask yourself—is this what we are? Look back to the foundation of your startup. Consider the expansion point you and the founders agreed upon. What was the service? What was the product? What is our brand identity?

Losing that identity and neglecting your foundation will be sure to allow cracks in your armor. Scope creep and venturing into products and services that weren’t intended for the company or otherwise aren’t well-known by the developers can stretch a nascent business to its limits.

Make goals, meet goals, and expand naturally. Have a set expansion plan in place and trust in the process—not the idealism that runs rampant in startup culture.

Isolation

Nurturing your foundation and keeping immune to the ideology of other startups like we recommended above might sound like a recommendation to remain independent of others—but in fact, the opposite is true.

Your startup needs play a valuable role in your customer’s lives. Whether you’re a B2C company selling SaaS, a B2B company that’s leveraging solutions for partners, or simply want to create the next big app, you aren’t monolithic. Your startup is just a small part of a larger economy—a larger community that needs nurturing and care to grow.

Isolation is one of the most dangerous problems a startup can have. No isolation means no understanding of the market. Without that understanding, and without enough time to grow and adapt to the changes, you’ll find yourself in hot water sooner than you think.

“No market need” is the number one reason startups fail. Keep that foundation secured, but don’t get too comfortable and too isolated to see the forest for the trees.

Money Flow

“No market need” might be the first cited reason for the failure of a startup, but right behind it is “no money.” Startups might have a reputation of being built from radical ideas, but there’s nothing radical about running a loss month after month. Sooner or later, the mathematics will catch up to you.

Any business, big or small, should keep a tight tab on the money flowing into and out of the startup. If you find your startup is hemorrhaging, that’s not a sign to start layoffs. There are always two solutions to money flow—tighten up the outflow and open up what comes in.

This is where outsourcing can pay off. Instead of hiring staff to do many of the administrative tasks management and founders hate to do, outsource what you can to make sure every hour spent in the office is as productive as possible. Professional employer organizations (PEOs) are perfect for this.

Some of the best PEO companies will not only take on the grunt work that can make startups feel like chewing glass but also pay for their services—and then some. Much like with an accountant, allow the people who work with money to pay for their services so you can get back working on the next big thing.

Leadership

Much like how the foundation of the startup is the basis through which the success may come, the upper echelons need to be similarly secured. Much of this security comes from the founders of a startup, who work to organize the ideas, secure financing, and keep the day-to-day work on schedule.

Following after Musk’s advice, it’s important to realize that leadership often comes disguised is hard work. The small tasks that make up the day are the true Turing test for your startup’s leadership.

You’ll need leaders that know that a ship is only as good as its crew. The studies are clear in this regard—leadership comes from inspiration far more than it does from issuing orders.

Bad leadership rots a startup from the inside out. Poor management leads to slower growth. Slower growth means more time in development. More development, more overhead, smaller profit margins…the consequences spiral out and only amplify as they do so.

The conception of the startup is key. When building that foundation, you need to make sure that everyone on the ground floor is ready and willing to put in the work and convince others of the value of doing the same.

While things continue to improve, launching a startup in the current economic climate hasn’t been shown to be easy. You’ll need every asset you can get to begin to build your business and work your way through these four common problems that can ruin a good thing before it has even begun.

So put your head down, focus on the daily tasks, and get down to the quiet art of building a business. If you play your cards right, it’s only up from here.